ACCT 210 Study Guide - Midterm Guide: Income Statement, Balanced Scorecard, Capital Budgeting

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amethystcheetah234

27 Sep 2017

School

University of Arizona

Department

Accounting

Course

ACCT 210

Professor

Heather Altman

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Document Summary

Exam 3 study topics (35 out of the 50 questions) To practice these topics, you should review the in class practice problems, in-class activities, graded wiley plus. Homework, and ungraded wileyplus questions that relate to the topics below. You can also work through the additional review packet posted on d2l for the new material. Appendix a (pv tables will be provided with the exam: present value of 1 and annuity calculations, no future value. Chapter 12 (pv tables will be provided with the exam: capital budgeting decisions (concepts and application of formulas), cash payback method, net present value (equal and unequal annual cash flows)

Related Questions

Completing a comprehensive budgeting problemâmanufacturingcompany

The Arthur Tire Company manufactures racing tires for bicycles.Arthur sells tires for $55 each. Arthur is

planning for the next year by developing a master budget byquarters. Arthurâs balance sheet for December

31, 2014, follows:

ARTHUR TIRE COMPANY

Balance Sheet December 31, 2014

Assets

Current Assets:

Cash $ 22,000

Accounts Receivable 22,000

Raw Materials Inventory 3,200

Finished Goods Inventory 7,250

Total Current Assets $ 54,450

Property, Plant, and Equipment:

Equipment 175,000

Less: Accumulated Depreciation (55,000)120,000

Total Assets $ 174,450

Liabilities

Current Liabilities:

Accounts Payable $ 7,500

Stockholders' Equity

Common Stock $ 135,000

Retained Earnings 31,950

Total Stockholders' Equity 166,950

Total Liabilities and Stockholders' Equity $ 174,450

Other data for Arthur Tire Company:

a. Budgeted sales are 800 tires for the first quarter andexpected to increase by 100 tires per quarter. Cash

sales are expected to be 30% of total sales, with the remaining70% sales on account.

b. Finished Goods Inventory on December 31 consists of 250 tiresat $29 each.

c. Desired ending Finished Goods Inventory is 30% of the nextquarterâs sales; first quarter sales for 2016

are expected be 1,200 tires; FIFO inventory costing method isused.

d. Direct materials cost is $16 per tire.

e. Desired ending Raw Materials Inventory is 20% of the nextquarterâs direct materials needed for

production; desired ending inventory for December 31 is $3,000;indirect materials are insignificant and not

considered for budgeting purposes.

f. Each tire requires 0.20 hours of direct labor; direct laborcosts average $20 per hour.

g. Variable manufacturing overhead is $2 per tire.

h. Fixed manufacturing overhead includes $3,000 per quarter indepreciation and $4,820 per quarter for

other costs, such as utilities, insurance, and propertytaxes.

i. Fixed selling and administrative expenses include $10,000 perquarter for salaries; $1,800 per quarter for

rent; $500 per quarter for insurance; and $600 per quarter fordepreciation.

j. Variable selling and administrative expenses include suppliesat 1% of sales.

k. Capital expenditures include $30,000 for new manufacturingequipment, to be purchased and paid in the

first quarter.

l. Cash receipts for sales on account are 50% in the quarter ofthe sale and 50% in the quarter following the

sale; December 31, 2014, Accounts Receivable is received in thefirst quarter of 2015; uncollectible

accounts are considered insignificant and not considered forbudgeting purposes.

m. Direct materials purchases are paid 75% in the quarterpurchased and 25% in the following quarter;

December 31, 2014, Accounts Payable is paid in the first quarterof 2015.

n. Direct labor, manufacturing overhead, and selling andadministrative costs are paid in the quarter

incurred.

o. Income tax expense is projected at $2,000 per quarter and ispaid in the quarter incurred.

p. Arthur desires to maintain a minimum cash balance of $30,000and borrows from the local bank as

needed in increments of $1,000 at the beginning of the quarter;principal repayments are made at the

beginning of the quarter when excess funds are available and inincrements of $1,000; interest is 12% per

year and paid at the beginning of the quarter based on theamount outstanding from the previous quarter.

Requirements

1. Prepare Arthurâs operating budget and cash budget for 2015,by quarter. Required schedules and

budgets include: sales budget, production budget, directmaterials budget, direct labor budget,

manufacturing overhead budget, cost of goods sold budget,selling and administrative expense budget,

cash receipts, cash payments, and cash budget. Manufacturingoverhead costs are allocated based on

direct labor hours.

2. Prepare Arthurâs annual financial budget for 2015, includingbudgeted income statement, budgeted

balance sheet, and budgeted statement of cash flows.

coralotter853

Comprehensive budgeting problem; activity-based costing,operating and financial budgets. Tyva makes a very popular undyedcloth sandal in one style, but in Regular and Deluxe. The Regularsandals have cloth soles and the Deluxe sandals have cloth-coveredwooden soles. Tyva is preparing its budget for June 2015 and hasestimated sales based on past experience.

Other information for the month of June follows:

Input Prices

Direct materials

Cloth $5.25 per yard

Wood $7.50 per board foot

Direct manufacturing labor $15 per direct manufacturinglabor-hour

Input Quantities per Unit of Output (per pair ofsandals)

	Regular	Deluxe
Direct materials
Cloth	1.3 yards	1.5 yards
Wood	0	2 b.f.
Direct manufacturing labor-hours	5 hours	7 hours
Setup hours per batch	2 hours	3 hours

Inventory Information, Direct Materials

	Cloth	Wood
Beginning inventory	610 yards	800 b.f.
Target ending inventory	386 yards	295 b.f.
Cost of beginning inventory	$3,219	$6,060

Tyva accounts for direct materials using a FIFO cost flowassumption.

Sales and Inventory Information, FinishedGoods

	Regular	Deluxe
Expected sales in units (pairs of sandals)	2,000	3.000
Selling price	$120	$195
Target ending inventory in units	400	600
Beginning inventory in units	250	650
Beginning inventory in dollars	$23,250	$92,625

Tyva uses a FIFO cost flow assumption for finished goodsinventory.

All the sandals are made in batches of 50 pairs of sandals. Tyvaincurs manufacturing overhead costs, marketing and generaladministration, and shipping costs. Besides materials and labor,manufacturing costs include setup, processing, and inspectioncosts. Tyva ships 40 pairs of sandals per shipment. Tyva usesactivity-based costing and has classified all overhead costs forthe month of June as shown in the following chart:

Cost Type	Denominator Activity	Rate
Manufacturing
Setup	Setup hours	$18 per setup hour
Processing	Direct man. Labor-hours	$1.80 per DMLH
Inspection	Number of pairs of sandals	$1.35 per pair
Nonmanufacturing
Marketing & general admin	Sales revenue	8%
Shipping	Number of shipments	$15 per shipment

Questions

1.Prepareeach of the following for June:

a.Revenuesbudget

b.Productionbudget in units

c.Directmaterial usage budget and direct material purchases budget in bothunits and dollars, round to dollars

d.Directmanufacturing labor cost budget

e.Manufacturing overhead cost budgets forsetup, processing, and inspection activities

f.Budgetedunit cost of ending finished goods inventory and ending inventoriesbudget

g.Cost ofgoods sold budget

h.Marketingand general administration and shipping costs budget

Tyvaâs balance sheet for May 31 follows.

TYVA BALANCE SHEET AS OF MAY 31

Assets
Cash		9,435
Accounts Receivable	324,000
Less: allowance for bad debts	16,200	307,800
Inventories
Direct materials		9,279
Finished goods		115,875
Fixed assets	870,000
Less: accumulated depreciation	136,335	733,665
Total assets		1,176,054

Liabilities and Equity

Liabilities and Equity
Accounts payable	15,600
Taxes payable	10,800
Interest payable	750
Long-term debt	150,000
Common stock	300,000
Retained earnings	698,904
Total liabilities & equity	1,176,054

Use the balance sheet and the following information to prepare acash budget for Tyva for June. Round to dollars.

All sales are on account; 60% are collected in the month of thesale, 38% are collected the following month, and 2% are nevercollected and written off as bad debts.

All purchases of materials are on account. Tyva pays for 80% ofpurchases in the month of purchase and 20% in the followingmonth.

All other costs are paid in the month incurred, including thedeclaration and payment of a $15,000 cash dividend in June.

Tyva is making monthly interest payments of 0.5% (6%per year) ona $150,000 long-term loan.

Tyva plans to pay the $10,800 of taxes owed as of May 31 in themonth of June. Income tax expense for June is zero.

30% of processing, setup, and inspection costs and 10% ofmarketing and general administration and shipping costs aredepreciation.

Prepare a budgeted income statement for June and a budgetedbalance sheet for Tyva as of June 30, 2015.

Listed below are the answers to the first question. Ijust need help with preparing a cash budget for June, and abudgeted income statement and budgeted balance sheet as of June30.

1
a.	Revenue Budget
	For the Month of June 2015
				Regular	Deluxe
	Expected sales in units			2,000	3,000
	Selling price			120	195
	Total sales			$240,000	$585,000

b.	Production Budget in Units
	For the Month of June 2015
						Regular	Deluxe
	Budgeted unit sales					2,000	3,000
	Add: target ending finished goods inventory					400	600
	Total required units					2,400	3,600
	Deduct: beginning finished goods inventory					250	650
	Units of finished goods to be produced					2,150	2,950

c.	Direct Material Usage Budget in Units andDollars
	For the Month of June 2015
	Direct materials required for
			Cloth	Wood	Cloth	Wood
		Units	Yards	B.F.	Total	Total
	Regular	2,150	1.3	0	2,795	0
	Deluxe	2,950	1.5	2	4,425	5,900
					7,220	5,900
	Cost Budget - to be purchased
			Beg.	Need to	Cost to
			Inv.	purchase	purchase
	Cloth	7,220	610	6,610	5.25	34,703
	Wood	5,900	800	5,100	7.5	38,250
						72,953

	Cost of direct materials to be used thisperiod
			available from beginning inventory				Total
	Cloth	34,703	3,219				37,922
	Wood	38,250	6,060				44,310
							82,232

	Direct Materials Purchases Budget
	For the Month of June 2015
						Cloth	Wood	Total
	Physical units budget
	To be used in production					7,220	5,900
	Add: target ending direct material inventory					386	295
	Total requirements					7,606	6,195
	Deduct: beginning direct material inventory					610	800
	Purchases to be made					6,996	5,395
	Cost of product					5.25	7.5
	Totals					36,729	40,463	77,192

d.	Direct Manufacturing Labor Cost Budget
	For the Month of June 2015
		Output	Labor hrs	Total	Wage	Total
		units	per unit	hours	rate
	Regular	2,150	5	10,750	15	161,250
	Deluxe	2,950	7	20,650	15	309,750
				31,400		471,000

e.	Manufacturing Overhead Cost Budget for Setup,Processing, and Inspection Activities
	For the Month of June 2015
	Total production		2,150	2,950	5,100
	Total sales		2,000	3,000	5,000
	No. of setup hours		86	118	204
	No. of shipments		50	75	125
	Labor hours		10,750	20,650	31,400

			Setup	Processing	Inspection	Total
	Allocation		Setup hrs	Labor hrs	No. pairs
	Rate		18	1.8	1.35
	No. of Activity		204	31,400	5,100
	Total		3,672	56,520	6,885	67,077

f.	Budgeted Unit Cost of Ending Finished GoodsInventory
	For the Month of June 2015
				Cost per	Regular	Total	Deluxe	Total
				Unit of	Input per		Input per
				Input	Unit		Unit
					Output		Output
	Cloth			5.25	1.3	6.825	1.5	7.875
	Wood			7.5	0	0	2	15
	Direct Manufacturing hours			15	5	75	7	105
	Machine setup			18	0.04	0.72	0.06	1.08
	Processing			1.8	5	9	7	12.6
	Inspection			1.35	1	1.35	1	1.35
	Total					92.895		142.905

	Ending Inventories Budget
	For the Month of June 2015
			Quantity	Cost per		Total
				Unit
	Direct materials
	Cloth		386	5.25	2026.5
	Wood		295	7.5	2212.5	4239
	Finished goods
	Regular		400	92.895	37158
	Deluxe		600	142.905	85743	122901
	Total ending inv.					127140

g.	Cost of Goods Sold Budget
	For the Month of June 2015
						Regular	Deluxe
	Beginning finished goods inventory, Jun 1					23250	92625		115875
	Direct materials used (c)							82232
	Direct manufacturing labor (d)							471000
	Manufacturing overhead (e)							67077
	Cost of goods manufactured								620309
	Cost of goods available for sale								736184
	Deduct ending finished goods inventory, June 30(f)								122901
	Cost of goods sold								613283

h.	Nonmanufacturing Costs Budget
	For the Month of June 2015
	Marketing and general administration				825000	0.08	66000
	Shipping
	(5,000 pairs / 40 pairs per shipment)				125	15	1875
	Total						67875

Again, I just need help with the cash budget question, and thebudgeted income statement and budgeted balance sheet as ofJune.

Thank you!

fuchsiacrow438

Our controller, Veronica Verrengia, is negotiating with our bamboo suppliers in China. We need the Softball Bat Divisionâs Master Budget for 2018 for our corporate strategic planning process, and we cannot wait for Veronicaâs return from China. We would like you to prepare the Softball Bat Divisionâs Master Budget for 2018 The deliverables are as follows:

I need help on questions 9-11

1. Sales budget, including a schedule of expected cash collections.

2. Production budget.

3. Direct materials budget, including a schedule of expected cash disbursements for materials.

4. Direct labor budget.

5. Manufacturing overhead budget, with a calculation of a pre-determined overhead rate.

6. Ending finished goods inventory budget calculating the expected value of the finished goods inventory as of December 31, 2018.*

7. Selling and administrative expense budget.

8. Cash budget.

9. Budgeted income statement for the year ended December 31, 2018.*

10. Budgeted balance sheet for December 31, 2018.*

11. Budgeted cashflow statement for the year ending December 31, 2018.* All the Master Budget schedules (except those marked with an asterisk) for the Softball Bat Division should include a column for each quarter and a total column for the fiscal year. We only need annual totals for the budgeted financial statements (schedules 9, 10, and 11) and we only need a year-end total for the value of finished goods inventory (schedule 6).

Iâve attached a brief description of the Softball Bat Division to the budget data Veronica gave me before she left for China. We eagerly await your results.

Bamboo Bat Company 3 Baseball bats have been traditionally made from hardwoods â primarily Northern White Ash, and more recently, Rock and Sugar Maple. These trees take 40-45 years to grow to the point where they can be harvested for lumber suitable for bats. Once established, bamboo is one of the fastest growing plants in the world. The chutes can be continually harvested without damaging the underlying root structure, which will keep sending up additional chutes. Bamboo can be grown on land not suitable for other crops, or as a natural fence with its roots holding the soil and preventing erosion. Thus bamboo is an environmentally friendly alternative to traditional hardwoods as a material source for baseball bats. Bamboo also has a tensile strength greater than steel. A bamboo bat delivers superior performance and resistance to breakage, while retaining the feel of a hardwood bat. Since bamboo chutes are hollow, bamboo bats are made by pressing bamboo "strips" into billets, and then turning these billets into bats. The Softball Bat Division specializes in making softball bats. All the softball bats have a two-tone finish with a clear lacquer handle and a colored barrel. Two examples are shown in the photos to the right. Lacquer is treated as an indirect material and included as part of variable overhead because the cost per bat is so small. Bamboo is the only direct material. During 2018, the selling price will be $82 per bat. The Softball Bat Division expects to sell the following number of bats during 2018. Quarter First Second Third Fourth Bats sales expected 71,000 84,000 76,000 80,000 The collection pattern for Accounts Receivable is as follows: o 65 percent of all sales are collected within the quarter in which they are sold o 35 percent of all sales are collected in the following quarter. o There are no bad debts/uncollectibles. Due to higher than expected demand this year the Softball Bat Division expects to have no finished bats in inventory. To avoid having that problem in the coming fiscal year, the Softball Bat Division would like to have the ending inventory of bats at the end of each quarter equal 25 percent of the budgeted sales for the next quarter. They would like to have 20,000 bats on hand at the end of 2018. Quarter First Second Third Fourth Ending FG inventory in bats as a percentage of the next quarterâs budgeted sales 25% 25% 25% ? Ending FG inventory in bats ? ? ? 20,000 Each bat requires 40 ounces of bamboo strips. The Softball Bat Division buys bamboo for $0.90 per ounce and expects the price to remain constant throughout the year. They expect to have to have 409,000 ounces of bamboo strips on hand at the beginning of 2018. At the end of each of the first three quarters, the Softball Bat Division would like to have their direct materials inventory Bamboo Bat Company 4 quantity to equal 10 percent of the amount required for the following quarterâs planned production. At the end of the year, Softball Bat Division would like to have 360,000 ounces of bamboo on hand. Quarter First Second Third Fourth Ending DM inventory as a % of the next quarterâs production requirement 10% 10% 10% ? Ending DM inventory in ounces ? ? ? 360,000 The Softball Bat Division buys its bamboo on account. It pays for 70% of its purchases of direct materials in the quarter in which they were purchased and 30% in the quarter after they were purchased. Each bat requires .90 hours (54 minutes) of direct labor. Employees engaged in direct labor will be paid an estimated $14.00 per labor hour. Wages and salaries are paid on the 15th and 30th of each month. Variable manufacturing overhead is estimated to be $13.50 per direct labor hour for the coming fiscal year. All variable manufacturing overhead expenses are paid for in the quarter incurred. Fixed manufacturing overhead is estimated to total $540,000 each quarter, with $360,000 of the total amount each quarter representing depreciation on machinery, equipment and the factory. All other fixed manufacturing overhead expenses are paid in cash in the quarter incurred. Display the pre-determined overhead rate to the nearest penny, but do not round the underlying calculation. Variable selling and administrative expenses are estimated to be $8.00 per bat sold. Fixed selling and administrative expenses are expected to total $280,000 each quarter, with $48,000 of the total amount each quarter representing depreciation on the office space, furniture and equipment. Other than depreciation, all selling and administrative expenses are paid for in the quarter incurred. At the end of the fourth quarter of 2018 the Softball Bat Division plans to buy new machinery and equipment for $1,400,000. The new machinery and equipment will be acquired at the very end of the year, so it will not be used in production and sales during the coming year and it will not be depreciated until the following year. The Softball Bat Division expects to pay 25% down and finance the remaining 75% of the equipment cost with a note payable. No interest payable will accrue on the note payable until after December 31, 2018. Softball Bat Division will pay quarterly dividends of $40,000 to its corporate parent, Bamboo Bat Company. Bamboo Bat Company would like the Division to maintain a minimum cash balance of $200,000. If after accounting for cash receipts and disbursements (including dividends) in the cash budget, the budgeted cash available cash will fall below $200,000 in any quarter, the Division will need to borrow additional cash. The Division has arranged a line of credit allowing it to borrow in $10,000 increments. Assume borrowing will take place at the beginning of any quarter in which the available cash would otherwise be below $200,000 so that at no time during the quarter will the cash balance fall below $200,000. The bank charges the Division interest at the rate of 1.25% per quarter (paid at the end of each quarter). The Division will also pay down the principal balance on the line of credit if they have sufficient cash to do so, at the end of each quarter. In addition to interest payments, the Division will make a partial repayment of principal in $10,000 increments until a further $10,000 increment would reduce their ending cash balance below $200,000. Bamboo Bat Company 5 The budgeted balance sheet for the Softball Bat Division on December 31, 2017 (which is the same as the budgeted balance sheet at the beginning of business January 1, 2018) is presented below. The Bamboo Bat Company owns 100% of the Capital Stock of the Softball Bat Division.

SOFTBALL BAT DIVISION â BAMBOO BAT COMPANY BUDGETED BALANCE SHEET

DECEMBER 31, 2017 ASSETS LIABILITIES & EQUITY

Cash $ 220,000

Accounts Payable $ 925,000

Accounts Receivable 1,400,000

Notes Payable 0

Raw Material

Inventory 368,100

Capital Stock 2,000,000

Plant and Equipment 1,700,000

Retained Earnings __763,100

TOTAL ASSETS $3,688,100 TTL LIAB. & SE $3,688,100

I need help on questions 9-11

skyarmadillo951

ACCT 210 Study Guide - Midterm Guide: Income Statement, Balanced Scorecard, Capital Budgeting

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